Delegation of information verification

An agent may manipulate information when transmitting it to the principal. A direct response to this problem is to verify the information. The paper explores a situation where the principal engages in information verification herself or alternatively delegates it to the agent. The paper finds that delegated verification can be optimal if the agent has to expend costly effort to acquire information before verifying it. Delegated verification promotes the agent's incentive for information acquisition. The paper also finds that delegated verification is more likely to be optimal if the agent is more biased.     

Transparency in agency: The constant elasticity case and extensions

This paper considers a hidden action agency problem where the principal has a single source of hidden information concerning the agent's utility, the agent's effort productivity, or the agent's cost of effort. We examine whether the principal should precommit to disclosing these different single sources of information to the agent. If the optimal contract is invariant over the hidden information and, thus, the disclosure rules (constant elasticity case), such disclosure increases the agent's utility, it can raise or lower profit and total surplus depending on the source of hidden information, and non-disclosure can be optimal if disclosure affects the agent's motivation. If the contract varies with the hidden information and, thus, disclosure rule, disclosure or non-disclosure can be optimal depending on whether the party's payoff is convex or concave in the information variable, respectively.     

Salesperson influence tactics and the buying agent purchase decision: Mediating role of buying agent trust of the salesperson and moderating role of buying agent regulatory orientation focus

Little is known about antecedents of salesperson influence tactic usage or how and which influence tactics impact buying agent purchase decisions. To aid such understanding, we draw from the relationship selling literature, and both regulatory fit and focus theories, to propose a novel theoretical framework and test hypotheses. The study's findings, derived by applying the critical incidence methodology to a heterogeneous dataset of buying agents (n > 200) representing small and medium enterprises and acting as key informants on salespeople, show that: (i) salesperson influence tactics heterogeneously explain the buying agent's trust of the salesperson, (ii) trust of the salesperson serves as a mechanism through which influence tactics impact the buying agent's purchase decision, (iii) buying agent's regulatory orientation moderates the relationship between salesperson influence tactics and buying agent's trust of the salesperson, and (iv) salesperson regulatory orientation predicts a salesperson's use of particular influence tactics. The article concludes with a discussion of the practical and theoretical implications of the research.     

Accept or reject? An organizational perspective

This paper compares the relative performance of different organizational structures for the decision of accepting or rejecting a project of uncertain quality. When the principal is uninformed and relies on the advice of an informed and biased agent, cheap-talk communication is persuasive and it is equivalent to delegation of authority, provided that the agent's bias is small. When the principal has access to additional private information, cheap-talk communication dominates both (conditional) delegation and more democratic organizational arrangements such as voting with unanimous consensus.     

回收商竞争环境下逆向供应链协调的激励机制设计

由于回收努力程度难以用契约量化,本文利用委托代理理论研究了回收商竞争努力程度情况下逆向供应链的激励机制设计问题。分别讨论了信息对称与信息不对称情形的逆向供应链激励机制设计方法,并比较了两种情形下激励机制的不同。结果表明,信息不对称情形下回收商不但获得固定收入,而且在获得收益提成的同时承担一定风险;两种情形下回收商的期望效用均为其保留收入水平,而信息不对称情形下制造商的效用降低;制造商设计激励机制时要考虑代理成本的影响因素并做代理成本与监督成本的权衡;回收商竞争程度的增加导致回收商努力程度提高,而制造商期望效用增加,代理成本减少;制造商希望回收商回收难度大;适当的竞争对回收商有利等。     

Incentives through consumer learning about tastes

We consider a long-lived firm that faces an infinite sequence of finitely-lived consumers. In each period, the firm can exert either high or low effort, which is the firm's private information. When consumers learn about the firm's talent from the outcomes of previous transactions, there exists no equilibrium in which the firm always exerts high effort. However, when consumers learn about their own tastes, such an equilibrium can exist. Consumer learning about tastes therefore is an alternative to reputational concerns that produces stable incentives. We discuss the implications of this mechanism for advertising, advertising content, and consumer education.     

Optimal organization in a sequential investment problem with the principal's cancellation option

This paper considers a two-stage sequential investment problem where the principal wishes to cancel the project if it fails in the first stage. Suppose that only the first-stage agent can observe the outcome in the first stage. There are two organizational forms to choose from: integration, where a single agent is in charge of investments in two stages; and separation, where two different agents are in charge of the two stages. Integration gives rise to a smaller wage cost of inducing high effort in both stages; however, in order to obtain the correct information to cancel the project, separation may have some advantage in terms of saving the information rent. We show that when the effort cost in the first stage is sufficiently small, the principal prefers separation because the first-stage agent has less incentive to lie about the outcome.     

Trading between agents for a better match

This paper studies externalities that arise when agents can trade outcomes ex post. I show that when agents can trade outcomes ex post, principals are incentivized to contract with agents ex ante to reduce ex post transfers to outside agents with whom the principals do not directly contract. This causes principals to offer agents piece-rates that are inefficiently low and lower than the piece-rates they would offer if trading was not allowed. Although trading reduces an agent's effort and could increase the agent's outside option of rejecting a principal's ex ante contract, principals ultimately gain from allowing ex post trading because such trading results in outcomes that better match their tastes.     

Decentralized control of cooperative and autonomous agents for solving the distributed resource allocation problem

This paper focuses on the decision-making mechanism of coordination protocol for a multi-agent system in collaborative, distributed environment requiring resource allocation solutions. The model of distributed collaboration network (DCN) for distributed resource allocation is developed. The use of monitored viability of each agent as a feedback for the agent's reflexivity and goal adjustment mechanisms during the coordination process is introduced. Question: Will (can) a multi-agent system, as a whole, achieve efficient resource allocations, when each agent makes independent decisions, adjusted by feedback of its own viability measure to maximize its own goal based on limited information about the entire system? To investigate this question, experiments were conducted by using the parallel simulator TIE/Protocol to model the DCN and multi-agent system behavior.     

National brand's local advertising and wholesale-price incentive under prior versus no prior information

We study the context of one private label (PL) competing against one national brand (NB) through a unique retailer. We propose a novel utility-demand function that includes the consumer's brand valuation, the retail prices, and the brands' qualities. We investigate the effect of the NB local advertising strategy on supply chain players' profits when either one of the players supports the advertising. Also, we explore the role of prior information about the manufacturer's incentive function on supply chain players' behaviors. We show that although the support for advertising from either the manufacturer or the retailer is Pareto improving, the manufacturer prefers to incite the retailer to invest in local NB advertising through profit sharing instead of using its money to counter the threat of the PL. Furthermore, we also show that the wholesale price incentive motivating the retailer to invest further in advertising is not preferred as expected, and all supply chain players are better off without prior information about the manufacturer's behavior in the context of branding competition and advertising-level dependent incentive.     

The Disappearing Relationship Between Directors' Pay and Corporate Performance

In this paper we investigate the relationship between the remuneration of the highest paid director and the economic performance of approximately 300 large UK companies over the 1980s and early 1990s. The rate of growth of directors' remuneration was very high over this time period (about 20 per cent per year on average) and very weakly linked to corporate performance. Any such link breaks down after 1988, when the very high pay awards received by top directors in the recessionary period up to 1991 appear to be unrelated to the performance of their companies, whether corporate performance is measured using stock market data or using accounting data on earnings per share. Rather, it appears that corporate growth is an important determinant of the change in directors' remuneration. These results strongly call into question the effectiveness of current systems of pay determination for top company directors.     

Price Discrimination with Demarketing

We study how demarketing interacts with pricing decisions to explain why and when it can be employed as the seller's optimal strategy. In our model, a monopolistic seller offers different price‐quality bundles of the product. A consumer's preference is private information. With demarketing, consumers must make a costly effort to purchase and/or utilize the product, whereas with marketing, the seller instead makes the effort so that the consumer's purchasing decision is independent of the cost of effort. Our result suggests that, for small or large effort costs, it is optimal for the seller to engage in marketing. For intermediate effort costs, however, demarketing can be optimal. With demarketing, the seller induces only the consumers with high valuation to make transaction effort. By doing so, the seller can price discriminate more effectively, thus extracting more surplus. We extend our analysis to the case where the seller can offer special deals through exclusive sales channels along with demarketing. Then, demarketing can be optimal even for large costs of effort.     

THE VALUE OF PRIVATE INFORMATION IN MONOPOLY*

We investigate a basic question about a monopoly with incomplete information: when does the seller have an incentive to allow potential buyers to acquire more private information about their tastes for the seller's product? Under plausible conditions such as log‐concave density of willingness‐to‐pay and convex marginal cost, the seller prefers that the paying customers be well informed as a group but be left in the dark regarding their individual tastes.     

On supply chain coordination for false failure returns: A quantity discount contract approach

A large proportion of consumer returns fall into the category of false failure returns, which refer to returns without functional defects. In this paper, we consider profits resulting from exerting costly effort to reduce false failure returns in a reverse supply chain. The supply chain as a whole has a strong incentive to reduce such returns for cost saving. However, retailers typically enjoy a full credit provided by suppliers for returns, so they may not have sufficient incentives to exert enough effort for supply chain profit maximization. In some scenarios retailers may even have the motivation to encourage such returns. We suggest using a coordination contract to resolve this profit conflict. We introduce a quantity discount contract which specifies a payment to the retailer with an amount exponentially decreasing in the number of returns. We present explicit forms of such contracts given different assumptions about the distribution of the number of returns. We also prove that the contract is Pareto improving. Besides, it is shown that when the contract is applied in a closed-loop supply chain, it can deter retailer's potential incentive to encourage returns. Moreover, some modifications of the contract can lead to easy allocation of supply chain profit.     

CONTRACTING FOR AN INNOVATION UNDER BILATERAL ASYMMETRIC INFORMATION*

We analyze licensing contracts between informed innovators and developers exerting profit‐increasing effort. Those contracts must simultaneously induce innovators to convey information on the value of their ideas, while inducing developers to exert effort and protecting the innovators' intellectual property rights. We show that the best innovators signal themselves by taking more royalties even if it reduces the developers' share of returns and their incentives. Moreover, royalties are more likely to be used when property rights are easy to enforce and pre‐contractual evidence on innovation quality is hard to produce.     

Intangible sales team resources: Investing in team social capital and transactive memory for market-driven behaviors,norms and performance

Complex offerings and evolving customer needs increase the demand for market-driven salespeople. Yet many of today's managers struggle to effectively deploy this selling approach. In light of this reality, we develop and test a multi-level market capabilities framework to examine team-level drivers and boundary conditions of market-driven salesperson behaviors, norms, and performance. Data collected in a lagged, multi-source, cross-level field study of 246 salespeople nested within 54 sales teams provide evidence that investments in team social capital (ITSC) support the self-correcting, customer-centric, learning behaviors needed for performance. Results show that managers' ITSC are positively associated with team goal monitoring, commitment to service quality, and learning effort. Further, goal monitoring and learning effort increase commitment to service quality, which helps drive sales performance. We also find that transactive memory systems (TMS) can be an efficient team knowledge resource that strengthens the learning effort-to-performance and service quality-to-performance relationships.     

Value creation and value capture under moral hazard: Exploring the micro‐foundations of buyer– supplier relationships

We combine the formalism of a principal–agent framework with a value‐based analysis in order to investigate the micro‐foundations of business partner selection and the division of value in contracting relationships. In particular, we study how the key contracting parameters such as efficiency, transactional integrity, incentive alignment, and gaming affect outcomes when buyers face competing suppliers. We show that integrity and efficiency increase value creation and capture for all parties and are complements. While incentive gaming is unambiguously bad for value creation, and reduces buyers' value capture, it can benefit some suppliers. For alignment, we find that neither party has an incentive to use fully aligned performance measures that maximize total value creation. We conclude by analyzing buyers' and suppliers' incentives to invest in integrity. Copyright © 2014 John Wiley & Sons, Ltd.     

Free‐riding in multi‐party alliances: The role of perceived alliance effectiveness and peers' collaboration in a research consortium

Research summary : Multi‐party alliances rely on partners' willingness to commit and pool their efforts in joint endeavors. However, partners face the dilemma of how much to commit to the alliance. We shed light on this issue by analyzing the relationship between partners' free‐riding—defined as their effort‐withholding—and their perceptions of alliance effectiveness and peers' collaboration. Specifically, we posit a U‐shaped relationship between partners' subjective evaluations of alliance effectiveness and their free‐riding. We also hypothesize a negative relation between partners' perceptions of the collaboration of peer organizations and their free‐riding. Results from a mixed‐method study—combining regression analysis of primary data on a major inter‐organizational research consortium and evidence from two experimental designs—support our hypotheses, bearing implications for the multi‐party alliances literature. Managerial summary : Free‐riding is a major concern in multi‐party alliances such as large research consortia, since the performance of these governance forms hinges on the joint contribution of multiple partners that often operate according to different logics (e.g., universities, firms, and government agencies). We show that, in such alliances, partners' perceptions have relevant implications for their willingness to contribute to the consortium's shared goals. Specifically, we find that partners free‐ride more—that is, contribute less—when they perceive the effectiveness of the overall alliance to be either very low or very high. Partners also gauge their commitment to the alliance on the perception of the effort of their peers—that is, other organizations similar to them. These findings provide managers of multi‐party alliances with additional levers to motivate partners to contribute fairly to such joint endeavor. Copyright © 2015 John Wiley & Sons, Ltd.     

Does importer involvement contribute to product innovation? The role of export market factors and intra-firm coordination

Relying on insights from resource dependence and information processing theory, this study analyzes the extent to which an importer's involvement influences product innovation at the industrial exporter firm. We consider two modes of involvement, collecting importer's feedback and importer integration in the product development effort. We propose that the relationship between importer involvement and product innovation is contingent upon the level of inter-functional coordination within the development firm, and contextual factors related to the export market. Data were collected from export companies participating in different international business-to-business markets. Results show that firms with high inter-functional coordination achieved higher leverage from importer feedback, but obtain no impact from importer integration in product development (PD). Contextual factors affect the relationship between importer involvement and product innovation: importer feedback affects product innovation in environments with intense competition and low technological turbulence. Importer integration in PD has a significant effect on product innovation in environments with low competitive intensity and high technological turbulence. This study contributes to a better understanding of the conditions that allow an exporter firm to create value through external relationships. Theoretical and managerial implications of these findings are discussed.     

First Versus Second Mover Advantage with Information Asymmetry about the Profitability of New Markets

Is it better to move first, or second—to innovate, or to imitate? We show that if one player's information about the profitability of new markets is only modestly superior, the possibility of foreclosing the market can lead to a first‐mover advantage. On the other hand, more extreme information superiority can reverse this, leading to a second‐mover advantage. Knowing more surely what is the best choice, the better‐informed player wants to delay to keep his information private and the less‐informed player wants to delay to learn. Because of this, more accurate information can actually lead to inefficiency by increasing the incentive to delay, and exogenous costs of delay can aid efficiency by neutralizing that strategic incentive. In fact, in some circumstances a player may purposely coarsen his information to deter imitation.